Last Wednesday, Meta revealed some dismal financials for the fourth quarter and full-year 2022. The company reported total revenue of $32.2 billion for the fourth quarter, a 4% decrease year-over-year. Revenue for the full year was $116.6 billion, down 1% over 2021. Those decreases are reasonable, expected even, but income from operations was $6.4 billion for the quarter, representing a 49% decrease year-over-year. For the full year, income from operations was $28.9 billion, a 38% decrease year-over-year.

It gets worse from there. Net income for the fourth quarter of 2022 was $4.7 billion, a 55% decrease year-over-year. Diluted earnings per share were $1.76 versus $3.65 in Q4 2021, a 52% decrease. For the full year, net income was $23.2 billion, compared to $39.4 billion in 2021, a 41% decrease. Diluted earnings per share were $8.59, compared to $13.77 in 20221, a 38% decrease.

Despite the grim financial results, Meta founder and CEO Mark Zuckerberg focused on the positive.

“Our community continues to grow and I’m pleased with the strong engagement across our apps. Facebook just reached the milestone of 2 billion daily actives,” said Zuckerberg in a February 1, 2023 news release. “The progress we’re making on our AI discovery engine and Reels are major drivers of this. Beyond this, our management theme for 2023 is the ‘Year of Efficiency’ and we’re focused on becoming a stronger and more nimble organization.”

“During the quarter ended December 31, 2022, we took several measures to pursue greater efficiency and to realign our business and strategic priorities. This includes a facilities consolidation strategy to sublease, early terminate, or abandon several office buildings under operating leases, a layoff of approximately 11,000 of our employees across the FoA and RL segments, and a pivot towards a next generation data center design, including cancellation of multiple data center projects,” Meta said in the news release.

When Zuckerberg talks about efficiency and being more nimble he is referring to the layoffs of 11,000 people, or 13% of the company’s workforce, announced in November 2022. At year-end, Meta had 86,4823 employees, a 20% increase year-over-year. This headcount included most of the workers to be laid off. On the earnings call, Zuckerberg reiterated that the company’s top two priorities are AI and the metaverse.

Other Meta highlights

Meta shared the following operational and financial highlights:

• The company reported, on average, 2.96 billion family daily active people (DAP) for the month of December, a 5% increase year-over-year.
• The company reported, on average, 3.74 billion family monthly active people (DAP) at year-end, a 4% increase year-over-year.
• Facebook had an average of 2.0 billion daily active users for December, a 4% increase.
• Facebook had an average of 2.0 billion monthly active users at year-end, a 4% increase.
• For the fourth quarter, Meta saw a 23% year-over-year increase in ad impressions delivered across all their apps (e.g., Facebook, Instagram, WhatsApp). The average price per ad decreased 22% year-over-year. For the full year, ad impressions increased 18% year-over-year, and the average price per ad decreased 16% year-over-year.

Meta’s 2023 outlook

During last week’s earnings call, CFO Susan Li shared the following outlook:

• First quarter revenue will range between $26 billion and $28.5 billion.
• Full-year 2023 total expenses will range between $89 billion and $95 billion, down from previous estimates of $94 billion to $100 billion.
• Restructuring charges are estimated to be about $1 billion, related to consolidation of their office facilities. This is about half of what the original estimate, but Meta said they may incur additional restructuring costs.
• Capital expenditures will range between $30 billion and $33 billion, down from a previous estimate of $34 billion to $37 billion.

“In closing, 2022 was a challenging but pivotal year for our business. We made important progress on our priorities and have taken significant steps to improve our efficiency and productivity. We are set up well to build on this work in 2023 as we continue investing for future growth while remaining focused on delivering strong financial performance,” said Li.

Insider’s Take

While Meta may have won a battle against the FTC to allow the company to buy virtual reality startup Within, their financials are very concerning. Zuckerberg is smart, so he can turn things around, but at a significant cost to his staff, his advertisers and perhaps some users across the Meta family of apps. Over the last few years, they have tried many things and shuttered them, like the Bulletin newsletter, Gaming and Neighborhoods, and they stopped paying for news.

Takeaway for subscription companies: We saw a headline the other day that seems to fit what many tech companies like Meta are growing through. This is the “great rethink,” not only for individuals who are trying to decide their next career move or path forward, but companies are trying to really narrow down their priorities as Meta is doing. They can no longer afford to throw mud at the wall to see what sticks. They have to thoughtfully prioritize and understand that each decision they make affects creators, users, advertisers and stakeholders like employees. When you are flush with cash, it is easy to take some risks. Right now Meta can’t afford to.